Analysts Back Bank Merger C&s/sovran Has Few Alternatives To Ncnb Offer

July 21, 1991|By JIM TALLEY, Business Writer

When it comes to merging with NCNB Corp., C&S/Sovran probably won`t be able to say no.

At least that seems to be the consensus of analysts about a possible merger between the two banks, which last week indicated a willingness to talk price and terms.

The prevailing view is that C&S/Sovran will negotiate hard and that NCNB may pay more than it originally planned. But in the end, C&S/Sovran will say yes -- partly because it would be good for the company, and partly because it would be problematic if it did not.

``The alternatives to accepting (an NCNB offer) are pretty unpleasant,`` said John Mason of Interstate/Johnson Lane in Atlanta.

There`s a lot of that in banking these days. Southeast Bank, which announced another quarterly loss last week, has been for sale for weeks and recently said it is exploring government assistance to make a merger deal possible.

Whether that will happen is unclear. But Chemical Bank and Manufacturers Hanover said last week they are merging in a deal that will create the nation`s second-largest bank -- pushing the proposed C&S/Sovran- NCNB combination to the No. 3 spot.

Similar transactions are expected to be announced in coming months as the banking industry consolidates and the marketplace becomes increasingly dominated by bigger banks. Critics of the trend have said less competition will be bad for consumers, while supporters have said consumers will benefit because bigger banks will be able to offer a wider range of services.

C&S/Sovran directors are wary of angering shareholders as they did two years ago when they turned down NCNB`s first offer. ``They don`t want to say no: the shareholders will be twice burned,`` said Charles Vincent, an analyst with Provident National Bank in Philadelphia.

Added Frederick Meinke at Raymond James: ``This Chemical-Manny Hanny thing makes it tougher for C&S/Sovran to wiggle off the hook. They`d have cost savings with NCNB, and C&S/Sovran investors would feel `why don`t you do that for us?```

C&S/Sovran could have trouble competing with NCNB if NCNB were to acquire other banks on C&S/Sovran`s turf in Virginia and elsewhere, Vincent and others said.

Most C&S/Sovran directors canvassed last week declined to discuss the negotiations with NCNB. But some said getting the best deal for shareholders was the top priority and that the board is not divided over pursuing the merger talks. ``Obviously they couldn`t agree to get together to discuss more details if the board was split,`` said one.

``I think C&S/Sovran`s board is thinking two to three years ahead, and I think they`ve signaled that they`re interested,`` Vincent said. ``I think there`s too much at stake for both companies for the deal not to go through, but C&S/Sovran`s board has to do things in such a fashion that it looks like they`ve extracted the highest price possible.``

Not all analysts think a C&S/Sovran-NCNB merger is a good idea.

``Since NCNB is presumably offering its stock as currency for this acquisition, it behooves the recipient to assess whether or not NCNB`s stock is being fairly valued. And we believe that NCNB`s stock is overvalued relative to that of C&S/Sovran,`` Kidder Peabody`s Charles Peabody said in a recent research report, according to the Wall Street Journal.

NCNB said Peabody ``is operating unencumbered by the actual facts.``

Regardless, the deal ultimately may turn on people issues: With C&S/ Sovran Chairman Bennett Brown close to retirement age at 62, analysts said C&S/Sovran President Dennis Bottorff, 46, may see his brightest future in working for NCNB Chairman Hugh McColl, who is 56.

``It would be a logical succession,`` Vincent said.

MERGER MONEY

Comparing the participants as of June 30 (figures in millions except net income/share):